Rolfe Winkler

Questions for Khuzami

April 16, 2010

When the SEC announced its case against Goldman this morning, the Commission’s Director of Enforcement, Robert Khuzami, happened to be at the same New Orleans conference as this columnist. I’ll have more thoughts after I’ve had a chance to read the complaint. In the meantime, I thought I’d share some notes from the question/answer session he did with those of us in the mini press corps on hand.

Bank failure Friday

April 16, 2010

Reporting from somewhere over Louisiana (Delta in-flight WiFi = very cool). Big bank failure news far tonight is a coordinated closure of three banks that involves three different regulators and a 50%/50% loss share agreement with FDIC and the acquiring bank. Typical loss-shares had been 95/5 and the news was they were going to 80/20. Here the FDIC has apparently secured a deal to share losses equally.

Unsustainable Mods

April 15, 2010

Treasury’s March report for the its mortgage modification program shows another uptick in the number of so-called “permanent” modifications. It’s a positive trend, sure, but still not much to celebrate.

Reader note

April 14, 2010

Hi folks….just a heads up that I’m traveling to New Orleans this afternoon for the Tulane Corporate Law Institute. So posting will be lighter than normal next few days.

Lunchtime Links 4-13

April 13, 2010

The Origins of the Next Crisis (Ed Harrison) Great post. Long, yes, but also wise. Understanding the distinction between stocks and flows is very helpful.

Afternoon Links 4-12

April 12, 2010

MUST READHow One hedge fund kept the bubble going (Eisinger/Bernstein, ProPublica) Yves Smith broke open the Magnetar story in Chapter 9 of her book. Bottom line, one hedge fund called Magnetar was able to use a little bit of cash to sponsor the creation of ultra-toxic CDOs, which they turned around and bet against via credit default swaps. Imagine building a house on top of a fire-pit and then over-insuring it. (This is why I’ve argued CDS should be regulated as insurance.) Meanwhile, the CDO departments at banks were happy to do the deals because it meant¬† bigger bonuses for them. Bank executives and risk managers higher up the chain hadn’t the first clue how these exotic instruments were structured so they agreed to warehouse some of the riskiest parts of the securities on their own balance sheets in the name of getting the deals done.

Bank failure Friday

April 10, 2010

Looks like just one tonight….


—Failed bank: Beach First National Bank, Myrtle Beach SC
—Regulator: OCC
—Acquiring bank: Bank of North Carolina, Thomasville NC
—Vitals: assets of $585.1 million, deposits of $516.0
—Transaction: loss share covering $497.9 million of assets
—Estimated DIF damage: $130.3 million

Greenspan’s 15% survival formula

April 9, 2010

I believe that during the past 18 months, there were very few instances of serial default and contagion that could have not been contained by adequate risk-based capital and liquidity. I presume, for example, that with 15% tangible equity capital, neither Bear Sterns nor Lehman Brothers would have been in trouble. Increased capital, I might add parenthetically, would also likely result in smaller executive compensation packages, since more capital would have to be retained in undistributed earnings.

Home equity horror

April 8, 2010

By now everyone knows that big banks have A LOT of second lien loans on their balance sheet. But how much is at risk of being written off? CreditSights put out a report that helps answer that question (no link). In the meantime, regulators may dust off a shelved capital rule so that they’ve more capital to deal with the problem.

Lunchtime Links 4-8

April 8, 2010

Greenspan: Lehman would have needed $68 billion more capital (Nasiripour, HuffPo) Great find from Shahien.¬† Greenspan said in written testimony that “with 15% tangible equity capital, neither Bear Sterns nor Lehman Brothers would have been in trouble.” 15% is a boat load. As of May 31st 2008, Lehman had just 4.3%. They’d have needed an additional $68 billion of capital to be at 15%!

Afternoon Links 4-7

April 7, 2010

$45 fee for carry-on luggage? (Peterson/Seetharaman, Reuters) Airlines gotta make money somehow!

The Canada bubble

April 7, 2010

So much for Canadian sobriety?

Recently the country’s chief bank regulator was in NYC to take a victory lap about successful bank regulation north of the border. Paul Krugman has argued that Canadian banks are superior to American banks because they are boring.

Lunchtime Links 4-6

April 6, 2010

DB’s $1 billion financing for Riga (Wood, Risk Mag) From the folks that originally broke the Greece/Goldman derivatives issue way back in 2003: “A financing transaction arranged for Riga by Deutsche Bank shows how local authorities can lay their hands on spending money without reporting it as debt.”

Lunchtime Links 4-5

April 5, 2010

Beyond bankruptcy and bailouts (Sheila Bair) The FDIC Chairman pens this good op-ed in the WSJ.

JPMorgan’s crisis lead appears to have vanished

April 2, 2010

Cross-posted from Friday’s NYT.

By Rolfe Winkler and Antony Currie

JPMorgan’s crisis lead appears to have vanished. Jamie Dimon’s investment bank was crowned king of the downturn. Last year, it sat atop the debt and equity underwriting league tables, and was number two in merger work. But it looks as though the edge is proving hard to keep.